Market insights

The health of Southeast Asia’s healthcare systems

23 July 2015 by Liew Hanqing

Across Southeast Asia’s booming economies, the demand for healthcare services is growing robustly, fuelled by rapid population growth and a shift in disease patterns across the region. In particular, Southeast Asians are suffering more from non-communicable diseases (NCDs) – often known as “Western diseases” or “diseases of affluence” -  brought about by the increased adoption of modern lifestyle habits such as sedentary office work, overeating, consuming fast food, and smoking. NCDs include heart disease, cancer and type-2 diabetes.

A 2014 report by consultancy firm BDG Asia said NCDs accounted for an increasing share of deaths in most Southeast Asian countries between 2008 and 2012. The relative death rate from NCDs has burgeoned in several countries in the region, including Indonesia (up eight percent), Malaysia (up six percent), the Philippines, and Cambodia (up five percent each).

Increasing pressure on healthcare systems

The rise in healthcare consumption is putting some public healthcare systems in the region under strain. Most of Southeast Asia’s fiscally-limited governments are fighting an uphill battle to meet their citizens’ growing healthcare needs.

According to Deloitte’s 2015 Healthcare Outlook, one of the countries feeling the stress is Thailand, which is struggling to cater to the hearty demand for healthcare following the introduction of a universal healthcare system in 2001. Its healthcare spending is expected to rise some eight percent a year from 2014 to 2018 to reach US$18.7 billion. Still, as the Thai government is working on reducing its budget deficit, healthcare spending as a fraction of GDP is expected to stay flat, despite growth in population and healthcare demand.

It is not alone: in Indonesia, the under-developed public healthcare system means there are only two doctors per 10,000 people. The country also suffers from severe infrastructural limitations – it has only six hospital beds per 10,000 people, compared to the global average of 30 beds per 10,000 people and the average in OECD countries of 50 beds per 10,000 people. Myanmar, too, is beset by a host of healthcare woes, brought about by the country’s military junta deliberately consuming most of its public budget for its own needs, at the expense of social and health services. In the World Health Organization’s (WHO) latest ranking of global healthcare systems, the country came in last for “overall health system performance”. Myanmar spends approximately two percent of its GDP on healthcare, significantly less than its regional counterparts. According to the WHO, Southeast Asian countries spend an average of four percent of GDP on healthcare – but even this is low compared to the 12 percent in OECD countries.

It is clear that public spending on healthcare will need to grow rapidly as the demand for accessible healthcare increases. But in the meantime, the gap in the sector is being plugged by the private healthcare industry, which is in the pink of health. This is especially so in more developed countries such as Singapore, Malaysia, and Thailand, where major private healthcare players offer top-notch medical services to patients from all around the world, for a fraction of the cost of similar services in the West.

The private healthcare boom

Even within the region, consumers who can afford it often opt to seek medical treatment in neighbouring countries where healthcare services are superior. It is a lucrative business – Indonesian tour agents frequently offer travel packages targeted at medical tourists, and prominent healthcare players often have dedicated customer service divisions catering to this market.

Singapore has enjoyed particular success in the private healthcare and medical tourism sector, buoyed by its flourishing clinical research and biomedical industries. The Singapore government has also actively promoted the nation as a regional hub for surgery, medicine and specialist services. In recent years, however, medical tourists have been increasingly heading for countries like Malaysia and Thailand, where quality medical treatment is widely available, and often cheaper to boot.

BMI Research found, for example, that a heart bypass in Singapore costs 41 percent more than in Thailand, and 106 percent more than in Malaysia. This year, the International Medical Travel Journal named Malaysia as the Medical Tourism Destination of the Year, further bolstering the country’s medical tourism sector. Thailand’s private healthcare industry has enjoyed a similar boom – over the last five years, the industry’s listed healthcare providers have consistently outperformed the Thai stock market.

Furthermore, with the advent of the ASEAN Economic Community (AEC) this year, trade and travel across the region is set to rise – a trend that is likely to give the private healthcare sector a further boost, but worsen disparities in access to healthcare in countries such as Thailand, as more healthcare workers in urban areas move to private hospitals for higher pay.

To keep up with the surge in private healthcare activity in the region, yet ensure the adequate provision of affordable and competent public health services at the same time, Southeast Asian nations must adapt quickly to changing consumer demands and economic circumstances.

Edited by Yen Feng and Clement Quek